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U.S. Chamber’s fracking job boom: Behind the numbers

Midwest Energy News

Kari Lydersen

There’s no question that widespread extraction of shale gas will have a significant economic impact. The scope of that impact, however, will likely be more difficult to pin down than industry projections might suggest.

A study commissioned by the U.S. Chamber of Commerce’s 21st Century Energy Institute says the extraction of “unconventional” shale oil and gas through horizontal hydraulic fracturing – or fracking – has meant a job boom even in states that don’t actually have shale deposits, with 1.7 million jobs already created and a total of 3.5 million projected by 2035.

The study was released in two phases in October and December, and a third phase is forthcoming.

Skeptics with environmental and citizens groups have questioned the numbers and also the benefits that these jobs actually provide to local communities. Many industry jobs are not filled by local residents, and a boom town effect, including escalating cost of living and other social problems, has been documented in places where an extraction industry rapidly arises.

They also say the study doesn’t account for the economic impacts of possible environmental problems and copious water use, or impacts on other industries and quality of life.

“We’re definitely seeing some local jobs – anyone with a CDL and a dump truck can get work hauling gravel or pipes or produced water,” said Paul Feezel, a resident of Carroll County, Ohio, the epicenter of the state’s fracking boom.

“There’s definitely more money floating around in the community, people buying new cars and agricultural equipment,” he said. “I’m told churches are seeing higher donations because people are tithing part of their signing bonus. But when you see the rigs and even the welders on the pipeline jobs, the license plates are all out-of-state.”

Jobs vs. impacts

Tish O’Dell, co-founder of the group Mothers Against Drilling in Our Neighborhoods (MADION) in the Cleveland suburb of Broadview Heights, said the number of jobs created by fracking should be measured against the possible impacts on industries including farming, dairies and tourism.

“If you were going to do a really serious study you would look at these things,” she said. “If water is contaminated and fish die, what are the fishermen going to do? If you have parks where people go for peace and quiet, what happens when you turn it into an industrial landscape? If you have an organic dairy and the soil is polluted, what does that mean? These are all valid questions.”

The U.S. Chamber study aims to quantify jobs created by unconventional oil and gas development even in “non-producing” states like Illinois, where it says ripple effects from fracking in other states have already created 38,652 jobs – almost as many as Ohio, where fracking is well underway.

Wisconsin, Minnesota and Michigan are also listed among the country’s “top 10 non-producing states” in terms of job creation linked to fracking. Ohio and North Dakota are among the top 10 “producing” states for job creation, with 38,830 and 71,824 jobs already created by fracking, respectively, according to the study. Texas tops the list with more than half a million jobs already created.

Using the IMPLAN model, a widely used tool originally developed for the U.S. Department of Agriculture, the study quantifies and predicts direct, indirect and induced jobs in each state. Direct jobs in producing states include construction, oil and gas extraction, metal fabrication and truck transport. In non-producing states, directly created jobs include the manufacture of chemicals, equipment and electronics used for fracking.

The study also counts indirect jobs, including financial and administrative services and real estate linked to oil and gas extraction. Induced jobs are created when workers spend their wages on goods and services including health care, amusement, food and beverages and general merchandise.

Mining of frac sand was considered a major source of direct job creation in Wisconsin, Minnesota and Ohio. In Illinois, indirect jobs theoretically already created included 1,393 in fabricated metal products and 353 jobs in real estate. And induced jobs already created included more than 2,000 in health care and 601 in insurance.

Skepticism in Ohio

The study is part of the 21st Energy Institute’s “Shale Works for Us” campaign launched in July. The study was carried out by IHS, a Colorado-based consulting company specializing in energy economics and forecasting.

The U.S. Chamber and report authors with IHS did not respond to requests for comment.

The study credits the Ohio Chamber of Commerce, state oil and gas industry groups and Ohio companies with stimulating job creation related to fracking, in part through community college programs training workers specifically in oil and gas field operations, trucking and welding.

These companies and groups have also collaborated to help Ohio companies sell equipment to fracking operations in Texas. And Ohio universities have focused on developing new materials, studying environmental safeguards and other innovations related to the industry.

But like Feezel, many Ohio residents and officials are concerned that oil and gas operations are bringing in out-of-towners rather than hiring locals. Ohio Gov. John Kasich has raised the issue and is surveying companies about the demographics of their hires.

Nathan Rutz, a Cleveland-based organizer for the environmental group Ohio Citizen Action, said he has trouble believing highly specific job creation predictions “with different numbers in the ones column” 22 years in the future.

“This is anticipating everything going perfectly,” he said.

Studies on job creation by other industries, including renewable energy, also often use the IMPLAN model or similar tools, and skeptics might similarly question the high numbers of indirect and induced jobs they predict.

‘My business will be destroyed’

Rutz added that Ohioans have already experienced the very mixed blessing that fracking-related jobs can be.

“Of course there is payout,” he said. “In Carroll County a lot of rural people have made money from leasing, that’s true. But it’s an extractive industry, and we have many many historic examples of what happens when there’s a gold rush or a coal rush or any other kind of mineral rush. It inevitably leads to short-term investment and once the resource is gone, the company has no interest in the area.”

Feezel and his wife moved to Carroll County in 1999 to retire, building an eco-friendly home. “We did pick this community because of how it was – the rural life, the clean air and water, seeing stars at night. You used to see keys left in cars at the grocery store, people leaving their homes unlocked. You don’t see that anymore.”

He worries that the area’s tourism industry is already being impacted by fracking.

“In this day and age unless someone is interested in fracking tourism, they are going to say, ‘I’m not going there,’” said Feezel, who co-founded Carroll Concerned Citizens about three years ago in response to increased coal mining and water extraction in the area. “Before there was a fair amount of tourism, church camps, people staying for the summer. Now if you are not already a regular you’re not going to start coming here.”

Many Ohioans have criticized the state government for being too supportive of the oil and gas industry. The Cleveland Plain Dealer recently noted that in May 2012 the state had promised to triple the number of inspectors of oil and gas operations by early this year, but they have hired only eight new inspectors compared to about 60 needed to meet their goal.

Since starting the Snowville Creamery in Pomeroy, Ohio five years ago, dairy industry veteran Warren Taylor has built it into one of the country’s best-known sustainable food companies. He employs 40 people full-time and ships dairy products across the Midwest, including cream used in the acclaimed Jeni’s Splendid Ice Creams out of Columbus.

Taylor doesn’t trust the state government to regulate the oil and gas industry, saying it’s been “completely corrupted – it doesn’t take the safety and health of citizens at all seriously.” He thinks his company could be decimated by even the perception of contamination from the dumping of fracking waste in his area.

“My business will be destroyed economically if there are any incidences here with contamination of water,” he said. “We’ve been told by scores of customers if there was fracking taking place anywhere near the facility, they wouldn’t buy our milk.”

Several Ohio communities have moved to block or more stringently regulate fracking. In November elections the municipalities of Broadview Heights and Mansfield adopted “environmental bills of rights” limiting fracking and requiring written permission from municipal officials for any new oil and gas operations.

“The bottom line is we should all be able to decide if we want this in our residential neighborhoods or not,” said O’Dell, who campaigned for the Broadview Heights charter amendment which challenges a 2004 state law limiting municipal jurisdiction over drilling.

Uncertainty in Illinois

The U.S. Chamber study categorized Illinois among “non-producing” states unlikely to do much unconventional oil and gas extraction in the future either because of a lack of profitable resources or political obstacles.

But both industry and watchdog groups say Illinois is poised for a possibly significant growth in fracking for natural gas in the New Albany shale. Already hundreds of thousands of acres have been leased and exploration is underway, though it remains to be seen whether the shale will ultimately go into commercial production.

In December, Illinois State University professor and renewable energy expert David Loomis released a study commissioned by the Illinois Chamber of Commerce Foundation estimating the job creation potential of fracking, focusing mostly on exploration.

Also using the IMPLAN model, he found that exploration for shale gas was likely to create between about 1,000 and 10,000 jobs, depending on the scale of operations. Two years of exploration followed by three years of commercial production would create more than 47,000 Illinois jobs, Loomis predicted.

“It’s too early to tell where we’re at, that’s a geologist’s question,” said Loomis. “The people I’ve talked to said there’s a strong possibility there would be natural gas liquids and shale oil in our formation – those two segments are a lot more profitable at current prices than dry gas, which makes it attractive at least for exploration.”

Loomis’s analysis did not include costs associated with environmental impacts or the economic or job creation impacts of lease and royalty payments. He said both could create significant induced job impacts – as people spend their money locally – but royalty payments would depend on the scale of extraction and natural gas prices while lease impacts would depend on how many landowners actually still live in the area.

“Is the money going to recirculate in the Illinois economy,” he asks, “versus being exported to Florida or Arizona?”